The expensive terms: Short commitment periods
While a short commitment period on an outsourcing agreement may seem attractive, it typically entails additional costs that should be taken into consideration.
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An ITO service agreement with a shorter contract term than the market standard is typically significantly more expensive than one with a longer commitment period. This is generally because service providers factor the increased commercial risk of a shorter commitment into the overall pricing of the agreement.
In fact, it is relatively rare that an operating agreement with a binding period of less than four years is an advantage for the customer.
This article examines the circumstances under which entering into an agreement with a short commitment period is—or is not—advantageous.
The article is relevant to anyone who works strategically with the procurement of outsourced IT operations services.